The price of gold exceeded $2600 per ounce once again yesterday, demonstrating the strength of this commodity as a safe haven in the face of global tensions and economic instability. In 2025, gold could reach a historical high of $3000 per ounce, fueled by interest rate cuts and increasing demand from central banks. However, substantial risks on the path to new peaks exist, such as slowdowns in rate cuts, a strengthening dollar, and trade and geopolitical decisions that can impact the direction of gold prices.
Gold has gained over 33% of its value in the last 12 months. This was the result of several crucial factors, the most important of which were international tensions, the ongoing war in Ukraine and the situation in the Middle East. These events prompted investors to seek safe harbours for their funds. Also significant was the rise in demand from central banks, which increased their reserves. This primarily concerned China and India, although the National Bank of Poland also made additional purchases of gold. An important factor was the prospect of declining interest rates combined with fears of inflation, which further supported gold as a hedge against inflation in the United States. A weakening dollar also played an important role and was conducive to the rise of gold prices.
After the U.S. elections, the dollar strengthened significantly. Investors believed that Donald Trump would lead an inflationary policy, which might limit the scale of interest rate cuts in the U.S. The dollar was also strengthened by concerns related to potential disruptions in world trade, especially the announcement of tariffs on Chinese products in the U.S. The price of an ounce of gold fell from $2790 on October 31 to below $2500 on November 14. However, gold slowly recoups losses and has again exceeded $2600 per ounce. The current price is $2630 per ounce.
Looking ahead, gold is exposed to increased volatility due to geopolitical events. On the one hand, the war in Ukraine continues, and decisions have been made to use American long-range missiles in Russia. On the other hand, Donald Trump’s future administration is shaping up, and staffing decisions may point to the direction of the new government. Additionally, uncertainty about U.S. interest rates, their probable declines and their scale, affects the gold market. As a result, predicting gold prices in the short term remains difficult.
In the long run, many analysts predict that gold will breach the $3000 per ounce barrier by 2025. Analysts from Goldman Sachs, Citigroup and Bank of America, among others, make such forecasts. However, it is important to remember that such predictions carry significant risks. After a long period of increases, gold might experience another correction, which would push its price below $2500. The key to rising gold prices may be lowering interest rates in the U.S. and around the world, and any disruptions in this cycle pose the greatest risk.
The issue of imposing tariffs on Chinese goods can also impact the gold market. Tariffs can intensify inflation in the U.S. and escalate international tensions, typically supporting gold prices. However, trade restrictions may also trigger the opposite effect through potential weakening of the dollar. Ultimately, although tariffs may favor rising gold prices, other factors, such as a strengthening dollar, economic slowdown in the U.S., or reactions of central banks, can counteract these increases.
The gold market remains extraordinarily dynamic and requires investors to carefully monitor both geopolitical events and macroeconomic decisions. In the upcoming months, we can expect continued high volatility.
Author: Paweł Majtkowski, eToro analyst
Source: https://managerplus.pl/3000-dolarow-za-zloto-co-napedza-wzrosty-i-jakie-sa-zagrozenia-72053
